Nonprofits have legal issues like any other businesses. And they also have matters unique to nonprofit, tax-exempt organizations – like state reporting obligations, IRS reports, fiduciary duties, fundraising and grant responsibilities, membership voting, and conflict of interest matters. Nonprofit compliance includes following state laws, internal rules, and IRS requirements.
There can be steep penalties if a nonprofit doesn’t stay compliant with laws and requirements. Failing to comply can result in a state attorney general investigation, IRS audit, state tax audit, fines and penalties, and/or loss of tax exemption.
Here’s a nonprofit year-end checklist to make sure you’ve covered your bases.
1. Annual Meeting & Minutes of Meeting
Has your board held its annual meeting this year?
Your board needs to meet…in an official meeting! With minutes taken!
Your nonprofit organization’s governing documents (bylaws, articles of incorporation) likely set out how often the board of directors must hold meetings. And state corporate laws set out how often nonprofit board of directors needs to meet — many times it is at least once a year. Check!
Meetings are the times when the board conducts key business, which may include
- approving budgets, reviewing financial statements
- electing new board members and/or officers
- hearing updates of the organization’s work
- conducting other business matters
- review policies and procedures, which may include investment policies, conflict of interest policies, employment policies
If you find that your bylaws set out for multiple meetings a year (monthly, quarterly), and your board hasn’t been meeting that requirement, it may be time to consider your operations and possible revision of bylaws.
Read: What Does a Board Do?
Did you take minutes? Did the board approve the minutes?
Keep minutes of these meetings! Your nonprofit should keep a copy of minutes of meetings of directors and any committees having the authority of the board of directors.
Read more: What Should We Include in Minutes?
2. Thank your donors
Have you thanked your donors for their gifts?
We know you may be in the midst of a year-end fundraising drive. Many nonprofits rely on donations for continuation of their work! In your asks, don’t forget to thank and acknowledge your donors.
We believe that all donations – regardless of size – deserve a quick and heart-felt recognition of thanks. Nothing makes donors happier (and ready to give again!) than receiving a prompt thank-you from a charity just supported.
Note that donors who make contributions over $250 need written acknowledgement to claim the deduction on their individual tax returns. Are you helping donors get what they need? Acknowledgments differ for cash gifts and non-cash gifts.
Read more: Donation Acknowledgment Letters
3. IRS Tax Reports
Have you filed your IRS Tax Informational Report – IRS Form 990?
Most exempt organizations file this annual return. The type of Form 990 to be filed by an organization depends on the filing year and the gross receipts of the organization. The different forms include Forms 990, 990-EZ, 990-PF and 990-N.
When is your 990 due?
Due dates for this IRS Form 990 differs based on the end of your organization’s fiscal year. The Form 990 is due 5 1/2 months after the close of the fiscal year. So, for organizations on the calendar year (year end of December 31), the IRS Form 990 will be due May 15.
And related to taxes….Have you collected W-9s for service providers and/or vendors to your nonprofits? You’ll be getting those 1099-Misc. forms out in January…so now is the perfect time to make sure you have what you need.
Read more: Nonprofit Tax Returns / Form 990
4. Grants & Contracts Reporting
Do you have financial grants from the government or from foundations that require certain reports?
Non-profit compliance includes making sure the organization follows requirements from its funders or donors.
Many government and foundation grants require the recipient of the funds (you, the nonprofit organization) to report on financial and program activity. Some require periodic reports; others require year-end reports. Some are narrative in description (what you did with the funds, who you served, progress towards meeting objectives, etc.); others are financial in nature (profit/loss, budget to actuals, etc.). The nonprofit organization needs to tell the funder how the funds were used. Review the terms of such grants and complete those reports.
5. State Reports & Registrations
Have you filed any required annual or periodic report with your state agency?
Many states require annual reports to be filed with the state corporation’s office (Secretary of State). Reports differ by state, but most reports request updates on addresses, registered agent information, and names of officers and directors. Filing these annual reports are required for the nonprofit to maintain an “active status” with the state.
You can check your state’s requirements on its Secretary of State’s website.
Have you filed any required tax reports with your state’s tax office?
Many states require an annual state tax filing. Check with your state comptroller’s office on tax filing requirements.
What about state charitable/fundraising requirements?
Non-profit compliance includes making sure the organization is registered in the states that have charitable fundraising rules.
Most states have adopted “charitable solicitation” laws. These laws differ greatly by state, but they are mainly designed for nonprofits and charitable organizations that make fundraising appeals in that state. The definitions of “fundraising appeal” or “charitable appeal” vary by state.
Some states call these registrations are called a registration statement; in others, it’s called a license, solicitation permit, or certificate.
Help with Nonprofit Annual Compliance
Let us help you with non-profit compliance.
We know that your staff and board prefer to devote energy and resources to achieving your mission rather than dealing with legal matters. Cullinane Law Group provides general counsel services to nonprofits, foundations, and associations. Our law firm helps nonprofits and associations follow all laws, contracts, and requirements so they are compliant.
We provide an annual compliance service to make sure your nonprofit gets all of its reports filed.